Russian oil pipeline flows set to resume after Hungary settles transit bill

© Reuters. FILE PHOTO: The Druzhba oil pipeline between Hungary and Russia is seen at the Hungarian MOL Group's Danube Refinery in Szazhalombatta, Hungary, May 18, 2022. Picture taken May 18, 2022. REUTERS/Bernadett Szabo

By Gergely Szakacs and Jan Lopatka

BUDAPEST (Reuters) - Russian oil flows halted to parts of Europe should resume after Hungarian group MOL paid transit fees owed to Ukraine, officials and a minister said, providing a temporary solution to the latest disruption of Russian energy supplies.

Russian state-owned news agency RIA reported the pipeline monopoly Transneft planned to resume oil pumping through the southern branch of the Druzhba, or Friendship, pipeline at 1600 Moscow time (1300 GMT).

On Tuesday, Transneft said Russian oil pipeline flows had been suspended to parts of central Europe since Aug. 4 because Western sanctions prevented the payment of transit fees from Moscow to Ukraine.

The suspension drove up oil prices, which have already surged along with those for other forms of energy, as Russia's invasion of Ukraine has raised concerns of shortages, especially in Europe, which depends on Russian fuel.

On Wednesday oil prices fell after the news the Druzhba pipeline flows would resume, and also on expectations of weaker demand.

Central European countries, including Hungary, are especially reliant on Russian energy and Hungary has criticised European Union sanctions against Moscow.

MOL said on Wednesday it had transferred the transit fee for the use of the Ukrainian section of the pipeline, which it said provided "a swift solution".

It said in a statement the halt had happened "due to technical issues emerging on the banking front".

MOL's Slovak subsidiary Slovnaft also made a payment to allow the resumption of flows to Slovakia, Slovnaft said.

TEMPORARY FIX

Slovak Economy Minister Richard Sulik told a news conference the payment by Slovnaft was a solution for the month of August after a Western bank had refused to process the transit fee payment made by Russia to Ukraine.

Ukraine has said oil flows through the southern leg of the Druzhba pipeline would resume later on Wednesday if it receives the substitute payment, Sulik said.

"I would not see any additional political context behind this because there isn't any. Simply, there was a technical failure or incorrect assessment. Such glitches happen," he said.

"My Ukrainian colleague (energy minister) assured me today that if the money arrives, oil will flow today... I expect that oil will start flowing in coming hours."

He said the payment issue was a surprise as Slovakia was under the impression that if oil imports are allowed under European Union sanctions against Russia, payments for transit were also allowed. He said the government was looking into the issue.

The suspension of pipeline flows has hit countries including Hungary, Slovakia and the Czech Republic, which have limited ability to import alternative supplies by sea.

Czech refiner Unipetrol declined immediate comment and it was not immediately clear if flows to the Czech Republic would resume as well.

Hungary's forint, central Europe's worst-performing currency, firmed to 397.3 versus the euro from over one-week lows at 401.35 per euro after the announcement, while MOL shares rose as much as 3.4%.

Russian gas flows to Europe have also been disrupted since Russia's invasion of Ukraine begun on Feb. 24.

Since last month, gas flows through Nord Stream 1, which usually transports a third of Russia's gas exports to Europe, has been running at 20% capacity as a result, Moscow has said, of faulty or delayed equipment.